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Small business loans for bad credit

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Jan 4, 2023

Fact Checked By:
David Nicholson - Finance Editor

Small business loans for bad credit – Best lenders, rates and how we can help quickly…

Although you may face more challenges, bad credit business loans are available in many sizes and shapes. Learn more about the options available to small-business owners with poor credit history in this full guide.

If you are looking to get a small business loan with bad credit, we can help; start online below now:

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It is not as easy to get funding for your business with poor credit history as it is for people with an excellent financial business credit rating.

From £1K – £750K. Rapid payout small business loans

Small business owners find it less challenging to get business finance with a poor credit rating as the increasing number of alternative lenders on the market grows. The FCA regulates all of our brokers at Loan Corp.

Traditional high street banks may still refuse to lend money to people with poor credit scores.

However, alternative lenders tend to be more willing and able to work with adverse credit histories than traditional high-street banks to provide business finance. Many lenders are now able to offer a bad credit small business loan.

If you do your homework and select the best option for you, there is no reason to think you won’t be able to get a business loan for your business, regardless of your business credit score.

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We deal with the simplest and most complex business loans with bad credit

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What business credit score influences the decisions of business finance providers?

Business finance providers will look at the credit history and director(s)’ personal credit history when your company applies for funding.

Although your business might be thriving, traditional lenders won’t be likely to offer you small business loans if you have a bad credit rating.

We will be discussing the most common issues that can cause bad credit ratings and make it difficult to obtain business finance.

Small business loans for bad credit overview:

Business CCJs: Finance providers may want to know how many County Court Judgments your business has received and at what frequency. CCJs indicate that creditors have taken legal action against your business over missed payments.

Winding-up orders: An application for a business loan can be affected if your company has been the subject of a winding-up petition. This applies regardless of whether or not it was rejected. Creditors may file a winding-up petition or order to close down your business to recover their debts.

The general financial performance of a limited business is publicly available. Most lenders will be happy to review the information. If your company is experiencing losses or has limited cash, there may be problems.

If you have had merchant cash advances which have defaulted or any invoice finance repayment issues this can impact your ability for credit.

Credit histories for other business owners: The credit history of others in the business, in addition to the directors’ personal credit history performance, could impact your ability to obtain a loan for the business, especially if they have significant control.

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Personal factors that can affect a bad credit small business loan

Past business failures As the director of a business your records in running companies will be scrutinised by potential lenders. This will not reflect well on you if you have a history of failing companies, bad business credit or poor personal credit history.

Bad credit history: Many people are plagued by poor credit histories. This is often due to failure to repay past debts on time. Poor personal credit and poor business credit could affect the financial options available to you.

Individual Voluntary Arrangements (IVAs): Individual Voluntary Arrangements are agreements between creditors and individuals to allow them to pay off an outstanding debt at terms that both suit. These agreements are usually formal and help debtors repay the money over a reasonable period of time. However, the lender may also write off some of their debt.

Personal Credit Card Judgments: If you have County Court Judgments against yourself as an individual, it indicates to potential lenders that creditors took legal action to collect debts you owed in the past. This may affect your credit score, personal loans, business credit history, and to get a business loan.

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Bad credit business loans with guaranteed approval

Do not let these credit rating problems get you down. We can help you find business loans for bad credit with guarantee approval within 24 hours of enquiry.

We will discuss the options of a business loan with bad credit, including invoice finance and guaranteed approval of business loans.

Let us get you approved for a business loan, start online below:

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Providers of a small business loan with bad credit:

You can still get a loan for your business if you have poor credit or any of these other issues. However, most alternative lenders specialising in providing bad credit business loans will require some collateral for the loan.

Smaller challenger banks may offer business loans on an individual basis. They might also be more flexible about your particular situation. If you believe you can build your case for a loan, this route is worth looking at.

Peer-to-peer lending is another option that you might consider when searching for guaranteed approval bad credit business loans. Online services can match you with the right loan provider for your situation.

Asset finance could be another option or a secured business loan, as it may be very hard for you to get an unsecured business loan with bad credit.

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There are other options for business finance.

Banks and other lenders are more likely to approve small business loans for businesses with poor credit if they can provide collateral in one form or another.

There are many options for financing your business, whether you need a secured loan or an unsecured business loan with bad credit. These are just a few.

Loans based on turnover: If your company has a high turnover, it may be possible to get a loan for business.

Personal guarantee loans: If your company’s credit or financial performance is in doubt, you can offer a personal guarantee that the loan will be repaid if your business cannot.

Invoice financing: Invoice finance can help you free cash from unpaid invoices. This can help increase cash flow and make it possible to access capital for growth investment. It comes with a price, however. Usually, you pay a percentage of your invoice total and a fee to the provider. Read our guide on what invoice discounting is for more information.

Asset financing: You may be able to put up new business assets to secure a loan. This can be useful if you have little cash but want to invest in high-quality machinery.

Businesses with bad credit are still eligible for financing, but it is more difficult to find the right solution.

Before you decide which type of bad credit financing to apply for, it is essential to research all options thoroughly.

What is bad credit?

Bad credit refers to an individual’s or company’s inability to repay their debt on time. This is based on past debt repayments and financial information.

Anyone who has taken out a loan or used a card to pay a bill in installments is eligible for credit history. This includes the frequency and punctuality of payments. This also shows the total amount owed to a borrower, their credit history, and any credit checks.

The score summarises all of this, and low credit scores can indicate that borrowing businesses could be considered risky.

Can I get a loan for a business with bad credit?

Bad credit can make it more difficult for someone or a business to get approved for a loan. For those with poor credit, business loans may not be available. This is because they are more likely to pose a risk to the lender.

You can improve your credit score gradually by paying off any accumulated debt and responsibly managing any new debt.

Bad credit is a problem when trying to get start-up loans for small businesses. Lenders consider these businesses risky, so a company without a strong financial history will be considered a higher risk.

You should not apply for multiple loans as it will damage your credit score.

Every application, whether approved or denied, triggers credit checks, which will be added to your credit file. This indicates an urgent need for money. This could result in a refusal or increased interest rates.

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Bad credit small business loans with no credit check

We can help you get small business loans with no credit check by going to our lenders that are private funders. They are a range of both businesses and personal lenders in the UK who will not credit check you for your business loan.

They will look at your affordability and do their own checks but will not base their decision on a credit check

We can get you approved within just 24 hours, start online below:

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How can I get bad credit loans for businesses?

A variety of loan companies and organisations can provide bad credit business loans, but some high street banks can finance a business with poor credit.

A secured loan may be an option if the borrower owns the property. It is more likely, however, that an unsecured loan will be the only option. There are no credit checks for business loans. They even come at a higher interest rate.

Guarantor loans, unsecured loans, will require that a designated individual or company cover any missed loan payments. These loans also have lower interest rates than other types of unsecured loans.

Peer-to-peer loans is another option. You owe money to many investors who have signed up for the lending platform because the finance was sourced from multiple lenders. These will have higher interest rates for those with bad credit.

Bad credit business credit cards are also available. They can help you avoid interest charges and improve your credit score if you repay them in full each month. Credit limits are usually below £1,000, and rates can be high if you wait to pay them.

Another type of lender you should consider is a credit union. Credit unions are regulated by the Financial Conduct Authority and lend money at a reasonable rate to their members. They assess borrowers’ income and determine if they can repay the loan. Credit unions offer many business loans, including lines of credit, installments, and start-up loans.

They also provide bad credit commercial mortgages, line of credit, credit cards, and business credit cards.

Credit unions can act as intermediaries for SBA loans (small business administration), which are guaranteed up to 85 per cent of their value by the government. A personal loan may also be available.

Bad credit applicants must submit a business plan and financial projections within the first year of applying for a start-up loan.

What is the cost of adverse credit business loans for small businesses?

Bad credit loans have higher interest rates than other types of loans due to the greater risk. Late payment penalties and early repayment fees may be subject to additional charges.

Credit unions are less likely to be charged this amount. Credit unions are allowed to charge interest at a rate of three per cent per month, one per cent in Northern Ireland and 42.6 per cent APR.

Read more: Business bank loan advantages and disadvantages

What is the best way to get finance for bad credit?

The process shouldn’t take more time than a regular loan. However, some applications for bad credit loans such as SBA loans can take a little longer.

The type of loan chosen will determine the time it takes to complete the application. A credit card or line of credit could be approved in days. However, an installment loan or mortgage could take many months to complete.

What security do I need in order to get a business loan for bad credit?

A personal guarantee of all owners with a 20% or more significant stake in the business is sufficient for most loans to businesses with poor credit. These individuals will be personally responsible for any defaults on loans.

For mortgages, the property purchased acts as security and can be taken away if payments are not made on time.

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